Connecticut Bankruptcy Law Blog

Of the many different bankruptcy options available to Connecticut residents, Chapter 13 is one of the most well-known ones. However, not every person may be eligible to file for it.

As FindLaw states, certain things may allow you to qualify for Chapter 13 bankruptcy while others may disqualify you. In order to qualify, you must not be barred by a past bankruptcy. There is a time limit between discharging debts through bankruptcy. If you filed for Chapter 13 before, you must wait two years before filing again. If you filed for Chapter 7, you must wait four years.

There are many advantages to purchasing and owning a home in Connecticut, from both a financial and personal point of view. However, owning a home can become burdensome if you have a change in financial circumstances and can no longer afford mortgage payments. 

According to the Consumer Financial Protection Bureau, you have several possible options to avoid foreclosure if this happens. A deed-in-lieu allows you to avoid foreclosure by giving the home back to the lender. A short sale is also an opportunity to dispose of your property and mitigate your loss. 

If you are like many people in Connecticut, you automatically assume that in a bankruptcy, some of your assets might be lost. This may happen if you file for a Chapter 7 bankruptcy but there is another type of consumer bankruptcy that may provide greater protection for your home, vehicle and other assets. That is the Chapter 13 bankruptcy.

As explained by the U.S. Courts, debts are not automatically discharged in a Chapter 13 bankruptcy the way they are in a Chapter 7. Instead, debts are essentially consolidated into one monthly payment that you would make to a trustee. The trustee, in turn, distributes payments to various creditors per an agreed-upon plan. This continues over a period of 36 months on the short end to 60 months on the long end. Once the plan is complete, debts are discharged.

In the years before your parents’ death, they may have accrued significant credit card and medical debt. Like other Connecticut residents in the same situation, you may wonder if you are required to continue making payments on the debt your parents left behind.

This can be especially true if you are receiving phone calls and letters from bill collectors asking for payment. They may even state that you are responsible for repaying your parents debt, which is understandably concerning. As NerdWallet explains, heirs do not legally inherit their parents’ debts, but creditors are not without recourse. Before you and the other beneficiaries receive an inheritance, your parents’ assets will be used to repay any outstanding debt. The family home, vehicles and other property may be liquidated for this purpose and distributed to creditors.